SB 586

This bill provides that guaranteed asset protection (gap) waivers may be offered

and sold in connection with the credit sale or lease of a vehicle and that gap waivers

are not insurance.

Current law imposes certain requirements, including various disclosure

requirements, on the lease to an individual of a motor vehicle that is used primarily

for personal, family, household, or agricultural purposes; that is for a term of more

than four months; and that has a total lease obligation, excluding any option to

purchase, of not more than $25,000 (consumer lease). If applicable, a consumer lease

must conspicuously disclose that the lessee is responsible for all or part of the “gap

amount.” Gap amount is defined as the difference between the amount to be paid by

the lessee under the consumer lease in the event of total loss or destruction of the

leased vehicle during the lease term and the amount received by the lessor from

insurance proceeds or other sources as a result of the vehicle's loss or destruction.

A lessor under a consumer lease may waive its right to hold a lessee liable for the gap

amount, and may include a separate charge in the consumer lease for this waiver,

if certain requirements are satisfied, including that the charge is conspicuously

disclosed to the lessee. A consumer lease may not be conditioned on the lessee's

agreement to obtain insurance or purchase a waiver covering the gap amount. A

lessor's waiver of its right to recover the gap amount, if made without separate

charge, is not property insurance and is excluded from the credit insurance

provisions of the Wisconsin Consumer Act (WCA), which govern insurance to satisfy

a debt in connection with a consumer credit transaction.

Current law also imposes certain requirements, including various disclosure

requirements, on a retail installment sale of a motor vehicle for personal, family, or

household use, and the retail installment contract must be in writing and signed by

the buyer. A “retail installment contract" means a contract to sell a motor vehicle at

retail in which the price of the motor vehicle is payable in one or more installments

over time and in which the dealer has retained title to, or taken a security interest

in, the vehicle. A sales finance company that acquires a retail installment contract

from a dealer must provide written notice to the buyer of the acquisition and provide

a statement of the contract's terms similar to that required of the dealer. A “sales

finance company" includes a dealer that sells or leases motor vehicles under retail

installment contracts or consumer leases and any person engaged in the business of

purchasing or otherwise acquiring retail installment contracts or consumer leases

from a dealer or lessor.

This bill provides that gap waivers may be offered and sold to borrowers in

compliance with the requirements set forth in the bill. A gap waiver is defined as a

contractual obligation under which a creditor agrees, for a separate charge, to cancel

or waive all or part of amounts due on a borrower's finance agreement in the event

of a total physical damage loss or unrecovered theft of a motor vehicle. A creditor is